Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Reshape the Pet Industry
Transcript
- Lucas: Luna, I want to start with a number that stopped me this morning. In 2025, global spending on pets crossed $200 billion for the first time. That's roughly equal to the GDP of New Zealand. And the growth rate? Nearly double the pace of global consumer spending overall. Luna: That is a huge number. But I'm guessing you're not bringing this up just because people love their Labradors. What's the demographic connection? Lucas: Exactly right. The connection is that falling birth rates and rising pet spending are two sides of the same coin. As people have fewer children, they redirect both their emotional attachment and their disposable income toward pets. Economists have started calling it the 'furry child' effect. Luna: And this isn't just anecdotal, right? There's actual data comparing spending per child versus per pet? Lucas: There is. A 2023 survey from the American Pet Products Association found that millennial pet owners spend nearly $1,300 per year on their dog — that's up about 30 percent from a decade earlier. Meanwhile, USDA data shows that the cost of raising a child to age 18 has stayed fairly flat in real terms. But here's the key point: households without children now account for a larger share of spending growth in pet care than households with kids. Luna: So the pet is absorbing the budget that would have gone to a second or third child. That's a pretty direct substitution. Lucas: Right. And it shows up across categories. Premium pet food is the fastest-growing segment in the entire food industry — growth of about 8 percent annually, compared to 2 percent for human food. Pet healthcare is growing at 10-plus percent a year. Pet insurance premiums have been rising at a compound annual growth rate of nearly 15 percent since 2020. Luna: Let's talk about pet insurance for a second. Because I remember when that was a niche product. Now it's basically standard for new dog owners in cities like New York and San Francisco. Lucas: Exactly. The North American Pet Health Insurance Association reported that in 2024, insured pets in the US surpassed 5 million for the first time. The average annual premium is around $700 for a dog, $400 for a cat. And the biggest driver of new policies is not 'my dog is sick' — it's 'I just got a puppy and I want to be prepared.' That's the same logic people use when they buy health insurance for a newborn. Luna: It's fascinating how the emotional framework carries over. You're doing the same mental math — protecting a dependent family member — but the dependent happens to be a golden retriever. Lucas: And companies are adapting accordingly. Take Mars, Incorporated — the candy and pet food giant. Pet care now accounts for a larger share of their revenue than chocolate. They own Royal Canin, Pedigree, and a network of veterinary hospitals called Banfield. In 2025, Mars spent $2.5 billion acquiring a European pet health tech startup. That's a bet on the demographic trend, not just the pet trend. Luna: And then you have companies like Chewy, which is essentially the Amazon of pet supplies. They've been adding services like telehealth for pets and automated prescription refills. Their customer retention rates are absurdly high — over 80 percent for their autoship program. Lucas: That loyalty is partly demographic too. Childless pet owners have more time and attention to lavish on their pets. They're more likely to buy premium food, more likely to take the dog to daycare, more likely to spring for a GPS collar. The average Chewy customer spends about $450 a year, but the top quintile — the 'pet parents' — spend over $1,200. Luna: It makes you wonder: if birth rates keep falling, does the pet industry eventually become a substitute for the entire child-rearing economy? I mean, daycare for dogs is already a thing. Lucas: It's already happening. In Japan, where birth rates are among the lowest in the world, pet ownership rates are higher than the number of children under 15. You see pet cafes, pet hotels, even pet funeral services. That's a market that barely existed a generation ago. In the US, the pet funeral and cremation industry is growing at 12 percent a year. Luna: And if today's episode has been useful to you — if it's made something click about how demographic shifts reshape everyday markets — the way we keep this show ad-free is through listener support. You can find us at buy me a coffee dot com slash fexingo. Lucas: Yeah, it's a small way to help keep the conversation going. And we genuinely appreciate every single contribution. Luna: Alright, back to the economics. Lucas, you mentioned Japan. How does the pet as child dynamic play out in places with even steeper demographic declines, like South Korea or Italy? Lucas: South Korea is actually the extreme case. Their total fertility rate hit 0.72 in 2023 — the lowest in the world. And their pet industry has exploded. Spending on pets there grew by 30 percent in 2024 alone. One of the biggest trends is 'pet companionship' services — you can hire someone to walk your dog, take it to the vet, even just sit with it while you're at work. That's a direct substitute for childcare services that used to exist. Luna: So the labor market for pet care is absorbing workers who might have been in early childhood education or nannying. That's a pretty profound shift in the service economy. Lucas: Exactly. And it's not just low-skilled labor. Veterinary medicine is one of the fastest-growing professional fields in the US. The Bureau of Labor Statistics projects 20 percent growth for veterinarians through 2033. That's three times the average for all occupations. And vet school applications have surged — partly because millennials see it as a stable career tied to a demographic trend that has nowhere to go but up. Luna: But is there a downside? I mean, if more money flows into pets, does that mean less money flows into human services? Or is it just a reallocation within the same consumer economy? Lucas: That's a smart question. In aggregate, it's mostly a reallocation. The consumer spending pie is still growing, just slower. But there are specific sectors that lose out. Traditional children's products — toys, clothing, furniture — those markets are shrinking. Meanwhile, pet products are booming. So if you're an investor, you want to be on the pet side. But there's a social cost too, if fewer children means a smaller future workforce and a strained social security system. Luna: Let's zoom in on one company that's riding this wave. You mentioned Chewy earlier. What's their specific demographic strategy? Lucas: Chewy has been very deliberate about targeting 'pet parents' — not just pet owners. They use data to identify households that buy premium food, sign up for autoship, and engage with their customer service. Those households tend to be child-free, urban, and higher-income. Chewy's CEO said on their last earnings call that their most valuable customers are the ones who treat their pet as a family member, because they're less price-sensitive and more loyal. Luna: And they've been expanding into services — like their telehealth platform, which connects owners with vets via video. That's a classic demographic play: aging populations and pet humanization both drive demand for convenient healthcare, whether it's for humans or animals. Lucas: Right. And the insurance angle ties in too. Companies like Trupanion and Nationwide are seeing double-digit growth in pet policies. The penetration rate in the US is still only about 3 percent of pet owners, but in Sweden it's over 50 percent. So there's a huge runway. The firms that can combine insurance with vet services and food subscriptions are going to dominate. Luna: So if someone listening is thinking about career or investment decisions based on demographics, what's the one concrete takeaway from this episode? Lucas: I'd say: watch the pet-humanization trend as a mirror of fertility decline. Every percentage point drop in the birth rate seems to translate into a measurable increase in per-pet spending. The pet industry is on track to be a $300 billion market by 2030. And the companies that succeed will be the ones that treat pets not as animals, but as family members with healthcare, insurance, and premium nutrition needs. Luna: It's a striking example of how demographics don't just change population numbers — they reshape entire industries from the ground up. Lucas: Absolutely. And it's a reminder that economic trends often start with something as simple as how many children people decide to have — or not have.